Rising Rupee Party to Indian stocks


Current rally in Indian market has coincided with rally in emerging markets and with appreciation in Rupee-Dollar rates. Even when one sees intra-day market, there exists a perfect co-relation between Rupee-Dollar rates and Nifty. Though such perfect co-relation seldom lasts in financial market, they still serve strong data point for keeping track of the market. In the month of January equity market across world have seen a rally, more so in emerging markets. Indian markets have gone up by 11.24% in January; Brazil went up by 11.13% and Hong Kong by 10.6%

Right way to look at the current price trend is that Risk-on trade is happening across emerging market. Appreciation in rupee is due to surge in FII flow in emerging markets across world. In last one and half month, whereas Indian Rupee appreciated by 8.7%, south African and Brazilian currency have appreciated by 9.3% and 8.3% resp. in the same time.

Rally of January 2012 once again establishes the futility of timing the market. An investor should ideally be 100% time invested barring the time when some bubble like condition in terms of valuation prevails. Timing the market when market is trading around fair value or below fair value is highly risky and one can easily miss such excellent rally like the one we had in January.

Coming to short term view, ongoing result has seen bit of an improvement as far corporate performance are concerned. Sensex EPS has seen continuous downgrade over last 5 quarters and for FY12, Sensex EPS expectation before result was 1105. Now with result of 18 companies of Sensex being declared, Sensex EPS stand revised to 1110 and suggest that downgrade cycle is over.

In terms of fair value, we have rolled over our value estimate from the base of FY12 EPS to that of FY13 EPS and accordingly our fair value estimate for Sensex has gone up from 15,950 to 17,090. 

State of pessimism during December and skepticism currently, suggest high probability that a new bull market has emerged. However one should be alert till clear indication of margin expansion for Indian companies in Q4FY12 emerges.


Coming to results declared during last week, ICICI Bank reported better than expected results. Our fair value Estimate for ICICI Bank is Rs 1125 at 2.1 times FY13 E Book value. ICICIBANK remains a safe buy on every correction.


BHEL results were discouraging and depicted the poor ground condition of economy as far as power infrastructure is concerned. Net order inflows for 3QFY12 stood at a negative Rs19.4 bn due to Rs58.5 bn worth of orders cancellation of a large private sector. With this order inflows for 9M FY12 stood at Rs152.7 bn (down 59% YoY). We currently remain neutral on the stock till budget session of the parliament waiting for policy clarity from government front.

Thank You and wish you a good trading & Investment week ahead

Investment Updates & Perspectives

  • Budget 2016- A Disciplined Action

    Amid all the news, views and counter views around acchey din, it is a fact that BJP government has initiated some strong structural measures to improve Indian economy since coming to power in 2014.

    Jan 2 2016
  • Indian Equity Market- 2014

    Post recent electoral mandate stock market has joined the party with all key indices trading at all time highs. Now that the dream mandate has come, specific question in minds of stock market participants are whether they should book profit or reshuffle their portfolio?

    May 17, 2014
  • Indian economic recovery will be of U shape with long trough period

    Post 3rd quarter results and poor GDP numbers, we have made changes in our Sensex EPS and market assumptions. We have reduced our FY14 Sensex EPS assumption by 3% to 1329. This changes our fair value Sensex estimate for calendar year 2013 from 22, 627 to 21,930.

    Mar 06,2013
  • Indian Equity Market - 2013

    At the beginning of 2012 our basic view was the Indian Stock Market was trading at a cheap valuation of 13 and a rally was evident at that level of valuation. Indian Equity Market are now trading close to Sensex 19,500 levels and is up by 27% in 2012.

    Jan 6,2013
  • Has Risk-Off entered in a Bubble Zone?

    Lately there been a headline shocker here in India, when Q4FY12 growth came at 5.3%. Though for market, it was an anticipated event and so market reaction to the news was highly indifferent. As we have said in the past, market movement at least in near term will be influenced globally by events happening in Euro-Zone.

    Jun 2, 2012
  • India- The most leveraged bet on global risk-on and risk-off

    Last month, RBI was full in its policing action in Indian financial markets to introduce liquidity and contain the Rupee depreciation; RBI took a bold step and bought around US$2.3bn of government bonds.

    May 30,2012
View all Investment Updates
Untitled document